Tadawul to gain from IPOs

Investors are hoping that a spate of new listings of family-owned businesses will restore energy to Saudi Arabia's stock market. Analysts, quoted by Reuters, say authorities are encouraging family-owned companies to list on the exchange. Listing family businesses, many of which are in consumer sectors rather than the capital-hungry banking and petrochemical areas, could lure money back to the stock market by giving investors more choice. "We get the sense that there is a lot of pressure from the government on family-run businesses to go public," Mahmoud Akbar, a banking analyst at NCB Capital, told Reuters. "It adds depth to the market." The main Saudi stock index climbed as much as 24 percent in the early months of this year but has since fallen back, standing only 3 percent higher yesterday compared to its level at the end of last year. "Most analysts agree that next year we will witness slower growth in petrochemicals, banks and telecoms — we are witnessing maturity in the main sectors of the economy, which in return lowers the expectations of exceptional growth," Abdullah Alawi, assistant general manager and head of research at Aljazira Capital, told Reuters. The market saw six initial public offers of shares worth a total of SR 4.8 billion in the first nine months of this year, compared to five IPOS worth SR 1.73 billion in all of 2011. Many of the offers have drawn strong demand. Travel agency Al-Tayyar Travel raised SR 1.37 billion from its IPO in May; the offer was 6.1 times oversubscribed. The stock is now up 9 percent from its IPO price. "We will see a new wave of family companies going for listing soon, to compensate for the lack of growth opportunities in current stocks," said Alawi. Arabnews